A Beautiful Mess

Deck: 

Only the fittest solutions survive in America’s policy wilderness.

Fortnightly Magazine - May 2011

Right now, we’re witnessing history in the making. Current events are affecting the energy industry unlike anything we’ve seen since the OPEC oil embargo in 1973 and the Three Mile Island accident in 1979. And this time, it’s happening all at once.

Consider: the Arab spring has raised America’s energy security concerns to a new level. Despite assurances from OPEC members that they’ll make up for any lost Libyan oil production, instability is spreading across the region and creating anxiety in the world petroleum market. As a result, oil prices now exceed $110 a barrel, and gasoline prices are projected to reach $4.25 a gallon by Memorial Day—just in time for summer vacation.

At the same time, fallout from the Fukushima-Daiichi disaster is spreading across the globe—literally and figuratively. Radio isotopes have appeared in rain and snowfall from Europe to the arctic. And countries from China to America have reacted to the disaster by putting the brakes on their nuclear plant licensing and development plans (see “Seismic Omen”). If it doesn’t end the nuclear renaissance, the Fukushima disaster has surely knocked it backwards by several years or more.

All things being equal, such momentous events would bring some fundamental changes in U.S. energy policy—i.e., spurring the creation of a long-term strategic plan for weaning America off energy imports, including a concerted effort to secure a sustainable future for nuclear power.

But things aren’t equal. Not in America, where energy strategy is literally a foreign concept.

Ad Hoc Havoc

The U.S. government’s failure to craft a comprehensive and coherent national energy strategy has left the utility industry twisting in the wind. As a case in point, last month the Bonneville Power Administration (BPA) publicly backed away from a controversial plan to impose rolling curtailments on wind farms in the Pacific Northwest as part of its effort to balance supply and demand resources. Record high snowpack levels, caused by the past year’s La Niña phase in the Pacific Ocean, are forcing BPA to deal with torrential snowmelt by running hydro plants at full tilt—producing more electricity than the region can absorb. BPA is pursuing other options, but transmission constraints still might force emergency cuts in wind generation.

In a region with about 2,500 MW of operating wind capacity, and another 2,500 MW expected to be added in the next two years, the situation raises obvious questions about the adequacy of BPA’s transmission system—which was built to serve hydro dams, not wind farms. But without a bankable policy directive from Washington, even a federal agency like BPA can’t decide whether it should build a transmission superhighway for wind power.

In some respects, the situation resembles what’s happening on the other side of the country, where ambitious plans to build an offshore transmission backbone seem to hinge on answers to federal policy questions that Congress has never really addressed (see “Treading Water”). Namely, is developing wind power a national priority? And if so, what’s our strategy for pursuing that priority?

The inconvenient truth is that we don’t have a national energy strategy, and we never have.

Virtually every time Congress enacts energy legislation, it basically continues the country’s longstanding grab-bag policy of encouraging efficiency and domestic resource growth. Congress extends tax incentives and grants to stimulate investments in wind power and other energy options. But the federal government has never attempted to devise and implement a long-term energy plan.

The closest we get to truly strategic policy is something like the Nuclear Waste Policy Act, which nationalized the responsibility for managing spent fuel from commercial reactors—a policy that can be described as a $10 billion failure (see “Spent-Fuel Fedcorp”). Or we get the FutureGen project, a white elephant that was born and died under the Bush administration, and now has been resurrected to demonstrate carbon capture and storage technologies that serve no commercial purpose in the absence of greenhouse gas regulation—which, incidentally, would be the most comprehensive national energy strategy we’ve ever had, if it weren’t a political dead letter.

Aside from such dubious legislative efforts, the closest we get to actual strategic, national policy goals are bully pulpit pronouncements, like those in President Obama’s recent state-of-the-union address, where he called for “80 percent of America’s electricity” to come from “clean energy sources” by the year 2035.

To be sure, such pronouncements tell us something about the administration’s priorities, as well as things like FERC’s demand-response compensation rule, which analyst Constantine Gonatas calls “covert policy” (see “A Buyer’s Market”). But priorities like this are in danger of being reversed when the political winds shift, as they always do. As such, they don’t represent strategy; they represent political ping pong.

What Would China Do?

The fact is, we don’t do energy strategy in this country. The whole idea of a national energy plan seems to conflict with our capitalist, pluralistic ideals. In short, it’s un-American.

By contrast, when China’s leaders decide the country needs a certain number of wind farms—or nuclear, coal or hydro plants for that matter—they set a goal, forge a plan, and make it so. That’s how China builds coal-fired power plants at the pace of two or three a week. And that’s how China overtook the United States in total installed wind capacity within the space of a few years (see “Green Transition,” Fig. 1).

But while this central planning might be faster and easier than America’s laissez-faire approach, it’s also less democratic, largely disregarding the rights of local citizens who might not want a power plant in their backyards.

Arguably that might be a reasonable price to pay for getting steel in the ground efficiently and cost-effectively. But China is learning the hard way just how inefficient and ineffective central planning can be. In 2009, Beijing raised its 2020 wind power target from 40 GW to 60 GW, and delegated authority to local officials to approve projects smaller than 50 MW. The result? Thousands of 49.5-MW wind projects, most of which make no economic sense, and at least a third of which aren’t even connected to the grid, according to an April 2011 report from China’s official Xinhua news agency.1 As a result, Beijing now must re-think its green energy strategy.

In some instances, central planning is working well for China. It’s the reason the country has become a global economic superpower, built gleaming showcase cities, and brought a large share of its population out of poverty. But in the shadow of such success, horror stories abound—of graft, corruption and exploitation; massive forced resettlements to make way for hydro reservoirs; coal-mine accidents killing thousands of workers each year; catastrophic acid rain and water pollution denuding the landscape; and chronic pulmonary diseases and deaths caused by the blanket of smog that chokes China’s industrial cities.

So as frustrating as America’s policy process might be, in the long term it’s the only approach that works for us. Forces as powerful as Fukushima and the Arab spring inevitably will bring energy policy changes. But America’s beautiful mess of a policy process will ensure that most of our decisions are based on sound economic, democratic and environmental principles—even if they aren’t strategic or coherent.

 

Endnotes:

1. “China Drafting New Rules for Small Wind Farm Projects” Xinhua via China Daily USA, updated April 11, 2011. See also Iain Mills, “For China, Spending but Few Results on Green EnergyWorld Politics Review, April 20, 2011.